Economy Simplified: Types of Money Market Instruments in India

Money Market Instruments Features of the respective instruments 
Treasury Bill1. Treasury Bills are one of the most popular money market instruments. They have varying short-term maturities. The Government of India issues it at a discount for 14 days to 364 days.
2. These instruments are issued at a discount and repaid at par at the time of maturity.
3. Also, a company, firm, or person can purchase TB’s. And are issued in lots of Rs. 25,000 for 14 days & 91 days and Rs. 1,00,000 for 364 days.
4. The TBs other than providing short-term cushion to the government, also function as short-term investment avenues for the banks and financial institutions, besides functioning as requirements of the CRR and SLR of the banking institutions
Commercial Bill(CB)1. Commercial bills, also a money market instrument, works more like the bill of exchange. 
2. Businesses issue them to meet their short-term money requirements.
3. These instruments provide much better liquidity. As the same can be transferred from one person to another in case of immediate cash requirements.
4. Organised in 1990, a CB is issued by the All India Financial Institutions (AIFIs), Non-Banking Finance Companies (NBFCs), Scheduled Commercial Banks, Merchant Banks, Co-operative Banks and the Mutual Funds.
Commercial Papers (CP)1. Corporates issue CP’s to meet their short-term working capital requirements. Hence serves as an alternative to borrowing from a bank. Also, the period of commercial paper ranges from 15 days to 1 year.
2. The Reserve Bank of India lays down the policies related to the issue of CP’s. As a result, a company requires RBI‘s prior approval to issue a CP in the market. Also, CP has to be issued at a discount to face value. And the market decides the discount rate.
3. Organised in 1990 it is used by the corporate houses in India.
4. The Commercial Paper issuing companies need to obtain a specified credit rating from an agency approved by the RBI (such as CRISIL, ICRA, etc).
Certificate of Deposit 1. Certificate of Deposit (CD’s) is a negotiable term deposit accepted by commercial banks. 
2. It is usually issued through a promissory note.
3. CD’s can be issued to individuals, corporations, trusts, etc. 
4. Also, the CD’s can be issued by scheduled commercial banks at a discount. And the duration of these varies between 3 months to 1 year. 
5. The same, when issued by a financial institution, is issued for a minimum of 1 year and a maximum of 3 years.
Call money 1. It is a segment of the market where scheduled commercial banks lend or borrow on short notice (say a period of 14 days). In order to manage day-to-day cash flows.
2. Overnight borrowing (Money at call): inter-bank money market where funds are borrowed and lent, generally, for one day.
3. Rate of interest in this market ‘glides’ with the ‘repo rate’ of the time.
4. Borrowing in this market may take place against securities or without securities.
Repos and Reverse Repos1. Repo allows the banks and other financial institutions to borrow money from the RBI for short-term (by selling government securities to the RBI).
2. In reverse repo, the banks and financial institutions purchase government securities from the RBI (basically here the RBI is borrowing from the banks and the financial institutions).
Cash Management Bill 1. This has been introduced since August 2009 to meet the temporary cash flow mismatches of the government.
2. The Cash Management Bills are non-standard and discounted instruments issued for maturities less than 91 days.
3. The CMBs have the generic character of Treasury Bills (issued at discount to the face value); are tradable and qualify for ready forward facility; investment in it is considered as an eligible investment in government securities by banks for SLR.

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